February 4, 2010
Panelists discussed the issues facing banks as the market recovers and the focus areas for state, private and foreign players. The panelists exchanged opinions on what lessons can be learned from the crisis and how the competitive landscape has changed over the past 18 months.
Anton Karamzin: The competitive environment varies significantly between segments, and competition for large clients has been very fierce in recent months. The banking sector has clearly become a borrower’s market, and the deficit of high quality borrowers explains interest rate levels. In such an environment, success awaits banks that find borrowers in adjacent areas, such as SME lending, and managing the level of risk individually. In the new environment, it will not be easy for banks to support margins, although could be easier for Sberbank to do so than for others.
Herbert Moos: Before the crisis, growth was important for VTB to capture market share, while post-crisis the strategy has changed to more emphasis on efficient growth. VTB will focus on proper capital allocation, cash flow generation in key segments and penetration into new regions and new products. For competition, the accent will not be on pricing, but on quality and quantity.
Oleg Viyugin: The answer to the question on competition lies in risk management. Prior to the crisis, banks “competed” by taking more risk onto their balance sheets, while post-crisis banks will aim to take on only acceptable and manageable risks. Mr Viyugin believes that private banks have to be more savvy in selecting clients than state banks, although both types of banks have their own challenges during the recovery. He sees no dramatic changes in the banking environment since the crisis and does not expect to see dramatic changes going forward, given that Russian banking still has a lot of untapped niches.
Andrey Borodin: He expects 15-20% retail lending growth in Russia in 2010, but he questions whether state banks should go after the risky retail segment, putting state and depositors’ money at risk. On the corporate side, Mr Borodin said that the crisis has made clear the lending priorities for banks: state borrowers, the trade and consumer segment, and other industries that have shown relative stability in 2009, such as utilities. He believes that the post-crisis competitive environment is hugely distorted, and this will need to be addressed by the regulators.
Alexander Levkovsky: Mr Levkovsky talked about role of private banks in taking out bailed banks during the crisis. As an example, he mentioned two banks recently bought by Promsvyazbank. One was taken on to show the regulator that private banks could make this work rather than from a purely economic perspective.
Nick Tesseyman: Mr Tesseyman spoke about the prospects for regional banks in the new environment. He believes that these banks will need to focus on new strategies while continuing to existing problems (such as NPL issues), develop relationships, place costs under strict control and play to their competitive strengths, which he sees in SME lending.
Stuart Lawson: There are concerns that in the corporate sector, problem loans were prolonged rather than restructured, which means that these issues will rumble on rather than be reset. Mr Lawson reminded the audience that retail lending did not really exist during the previous crisis, so we do not know how borrowers will react. Solvency laws would be an important step to encourage banks to lend, and banks also need to know how they ranked in relation to pre-existing debt.